Dovish Fed Bets Pummel Dollar, Boost Gold Ahead of NFP

The dollar took a hit on Thursday after Governor Christopher Waller expressed his inclination to keep interest rates unchanged at the September meeting, sparking bets of a dovish Federal Reserve. This move sent investors scaling back their expectations for a 25-basis-point increase in the Fed funds rate, which now stands at around 50%, down from nearly 70% earlier in the week.

The yen led the charge against the dollar, surging to its best weekly gain since July when the US and Japan intervened jointly. The Japanese currency gained 2.3% on Thursday alone. Waller's comments also caused a drop in Treasury yields, particularly the short-term interest-rate sensitive two-year note.

Despite the dovish Fed bets, gold is once again testing the $4,500 level after rebounding from its week lows. The precious metal's next move will depend heavily on the upcoming August jobs report, which is expected to show a rebound of 56k jobs in August. A strong jobs report could provide the boost hawks at the Fed are hoping for.